I have had this question in my head for long ago.
Consider a below scenario:-
The society on the whole sees if you have a car, house and income of 80+k, you are already well settled. You are considered rich or well settled. Now this is just a skewed example but I am pretty sure most ideal definition of society’s rich Is something like this. Even if someone is settled in abroad say in US paying home loan there , they are considered wealthy.
The questions I have are below?
A. Who is the real rich ? How to measure progress ? Should we use balancesheet or society standards to measure progress?
Based on above scenario. Are they considered rich? Are they actually rich? I am asking because when I look at their balancesheet, their net worth is in negative especially home loan just pulls them all into -ve. Even for people living in abroad , they all have mortgage there so their balancesheet is negative too.
Personally:- I am not comfortable with having sleep everyday thinking about paying EMI. Do let me know your perspective?
Only confusion is society has a different scale where they don’t see balance sheet but rather a schizoid set of parameters like (have car, house , status etc) . From a society view a person is rich but from balancesheet view they worse than beggar with net worth in -ve. Which one scale should we use to measure financial progress? Balancesheet at the end of year or check if we have hit society kept standard
The second question is based on above .
B. If we have measuring scale of our financial progress, how to move forward? What’s the guidance here ?
i. So if we are measuring ourselves based on balancesheet? What should be our goal ? It states clearly that we need to less liabilities to make net worth high? So every year, do we aim to increase income generation and increase accumulation of assets i.e MF, bonds , real estate (without loan)? What should be the guidance ?
ii. So if balancesheet is not seen as a measuring stock, having society’s standards, I see that getting certain stuff is called making Progress. Okay if that’s the case, consider like all the basic stuff has been done fully paid car, bike, decent bank balance, MF investment and fully paid house. Should one take loan again to buy real estate or always be in debt acquiring assets (note :- exception bussiness). I mean should one only see if we are able to pay off EMI and have stuff. If yes, how much % of income should be EMI? What’s the guidance here?